Donations shake-up passes NSW Parliament

Trade unions are considering a High Court challenge to electoral funding laws passed by the New South Wales Parliament late last night.

The legislation passed the state's Upper House just after midnight.

Under the laws only individuals will be permitted to make donations to political parties, with a cap of $5,000 a year.

Donations from trade unions, corporations and lobby groups will be banned.

Premier Barry O'Farrell says the changes will help clean up state politics.

"There's now a level playing field for all parties, for all candidates. It's a fair electoral system," he said.

"Ultimately this is about putting power in the hands of individuals. That can't be a bad thing.

"What I'm particularly pleased about is this has ended once and for all the donations for decisions culture that grew up under the former Labor government.

But Unions New South Wales secretary Mark Lennon says the changes are unfair and unworkable.

"We cannot let this legislation stand without having it challenged in the High Court," Mr Lennon said.

"This is a real travesty for democracy in New South Wales.

"The Government talks about and the Premier talks about having a balanced political system. This is no way balanced.

"This is a system that will now favour the wealthy and ensure that working people can't have an effective political voice."

The Premier says he is not concerned by the legal threat, and the laws will come into force before the end of the month.

"The advice we have from the drafters of the legislation is that these laws will withstand legal challenge," Mr O'Farrell said.

The Opposition has also condemned the changes, but much of Labor's anger has been focused on the Greens for supporting the legislation in the Upper House.

Opposition spokesman Steve Whan says it is a blatant attack on Labor.

"It's unprecedented to see a government in Australia which uses its majority in the Parliament to target and attempt to destroy its political opposition," Mr Whan said.

"I think most people would be worried by a government that's willing to do that and certainly be worried by the fact that the Greens have simply rolled over and agreed with the Government."

Greens MP John Kaye has defended the party's decision to support the legislation.

"The rivers of cash from corporations, from unions, from other organisations that have flowed in the past into political parties came to an end at about 10 past 12 this morning in the New South Wales Upper House. This is a big step forward for politics in New South Wales," Dr Kaye said.

"The ability of unions to pool their money into a single campaign has been protected. They will not be able to give money to the Labor Party or any other political party, but that is part of cleaning up politics in New South Wales."